DTN Early Word Livestock Comments

Cattle: Lower Futures: Mixed Live Equiv: $263.41 -$0.06*

Hogs: Higher Futures: Higher Lean Equiv: $114.25 +$0.95**

*Based on the formula estimating live cattle equivalent of gross packer revenue. (The Live Cattle Equiv. The index has been updated to depict recent changes in live cattle weights and grading percentages.)

** based on formula estimating lean hog equivalent of gross packer revenue.

GENERAL COMMENTS:

Live cattle futures closed higher Friday, maintaining the recent sideways trading range that has developed. Cash cattle traded lower, but that had already been factored into the market. Traders wanted to even up some of their positions, as they never know what news will transpire over the weekend. Cash cattle traded $3.00 lower in the South and $5.00 lower for dressed cattle in the North. Packers reduced slaughter significantly last week in an effort to improve their margins with the substantial decline in boxed beef prices recently. Boxed prices Friday were mixed, with choice down $0.95 and select up $1.98. The Cargill plant in Fort Morgan, Colorado, will be down due to planned maintenance, which will have an impact on slaughter next week. Their downtime is scheduled for 10 days, and they're expected to be back online on Oct. 13. Feeder cattle futures bounced on Friday, but were unable to close the chart gap in the November and January contracts that remained from Thursday morning. Feeder cattle prices at auctions traded mixed last week, but held strong.

The liquidation in hog futures ran its course Friday, allowing futures to close higher. Some short-covering took place ahead of the weekend as traders did not want to press the market any further. Cash was lower throughout last week, keeping pressure on the market. Interestingly, cash continued to decline, but packers were able to purchase a substantial amount of hogs and needed to as they increased slaughter speed. It would seem they are running a higher slaughter speed due to increased demand, but it is not translating into higher prices. The National Daily Direct Afternoon Hog report showed cash down $0.20 on Friday, finishing out a week of consistently lower prices. Pork cutout value increased $0.95, providing limited support. The Commitments of Traders report was not released due to the government shutdown.

	BULL SIDE		BEAR SIDE
1)	Cattle futures maintained a sideways trading pattern into the close of the week. This may continue this week.	1)	Continued cash weakness in the cattle market may be the result of reduced demand. Consumers have curtailed their demand for beef due to high prices.
2)	The November and January feeder cattle futures contracts have chart gaps above the market that likely will be filled.	2)	The decline in boxed beef may be more than just seasonal weakness. Feedlots have been holding animals at higher weights and cash weakness has triggered increased sales.
3)	The liquidation phase of last week may have run its course. Traders may buy the break.	3)	Packers were able to purchase the hogs they needed last week at lower prices. Market-ready hogs are plentiful.
4)	Hog slaughter has increased despite higher weights. This indicates demand has improved.	4)	Demand for pork may be improving, but higher weights keep packers from being aggressive in the cash market.

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CST. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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